for a stock setup, a custom folder icon is not allowed. The folder icon takes an amalgumation of the icons of the stored apps within the folder. But to create & rename a folder, on the home screen, Menu->Create folder, type in new folder name.

I figured out I pretty much have to chase down the icon I want to join. It finally will rest a bit and let me group another app icon with it. Then I can rename the file and even change the icon image.
Thanks again,
Rob